Increasing exposure to Chinese equities today requires a long time horizon, or a willingness to be tactical amid what will be a difficult few years A case can be made that Chinese equities are attractive today based on low valuations and may rally strongly if policymakers apply additional stimulus to support the slowing economy. However,…
China’s currency recently experienced its sharpest decline since it unpegged from the US dollar nearly nine years ago. China wants a more volatile exchange rate to introduce two-way risk in the currency market, meaning a continued steady rise in its currency is not a foregone conclusion. To help offset slowing investment growth, Chinese authorities may…
In 2014, we expect a rougher road for Australia, which is currently in a transition phase that has been quite benign so far, but may not remain so.
EM equity valuations are the key driver of returns over the long term. The benefit from valuation mean reversion should be substantial, as EM equities trade at a 35% discount to DM equities and a 45% discount to U.S. equities, compared to our assumed fair value discount of 10%. We expect EM equities to remain…
Looking ahead to 2014 we are focused on several key themes, among them the evolution of global monetary policy, the likelihood of European equities exceeding diminished expectations, and the headwinds, risks, and opportunities associated with emerging markets equities.
While access to the Chinese A-share market is improving, investors should not rush in. Given that the market is still evolving, finding a skilled manager to navigate the challenges facing the A-share market is key.
Despite recent weakness, we do not believe a 1990s-style emerging markets currency crisis is brewing.
A mid-year update on our views, focusing on the macroeconomic factors that impact short-term market moves and the valuations that influence long-run results.
Despite the recent sell-off, Japanese equities are up considerably since last October given the promise of Abenomics; however, we remain tactically neutral given valuations and significant structural headwinds.
For 2013, Australian equities look vulnerable in the near term, but still appear attractive relative to fixed income. While we are more cautious than the consensus, we suggest investors maintain neutral allocations to risk assets and keep the ship “steady as she goes.”